Clearing Misconceptions on Customer Value

Here are some common ideas posted in blogs, and what is factually correct. The word Value is often misused and misunderstood. You can relate to some of these. These may help you in business or as a buyer.

  1. Satisfaction is the reason why people buy: People buy because a product or a service is worthwhile to them versus competitive products or services. Satisfaction is a necessary condition but not a sufficient condition for purchase. Sometimes, we buy even when very dissatisfied. An example could be a neighborhood petrol station, where we had a poor experience.
  2. High Value products have low satisfaction: This implies value is price, and that if something is high priced it has low satisfaction. This is confusing value for price. Sometimes, people pay “money for value” which means they buy high priced items. Thus if you buy a BMW, you can be very satisfied.
  3. Low Value products have high satisfaction: This implies value is price, and that if something is low priced it has high satisfaction. This is just not true. It has been proved that at every price point, Customers look for Value. What does that mean: If buying a pen, whether a Mont Blanc or a Bic, the Customer is looking for Value, and buys on Value. You may be very dissatisfied with a low cost ball pen, when it streaks while writing.
  4. Satisfaction measures Customer Value: Customer Value and satisfaction studies are different. Satisfaction measurements are done on transactions and generally right after the transaction by the user. Normally the top two boxes are measured. Customer Value studies are done a few weeks after the transaction and on the decision maker, not necessarily the end user, so as to get embedded perceptions. Customer Value studies are done versus competitive alternatives and are ratios. Thus a Customer Value study always compares you to competition and is not based on your score alone but their score also.
  5. Value means Benefits: Value is what the Customer gets (benefits) vs. cost (price and non-price) versus competing offers. While colloquially we use Value to mean benefit or price, Customer Value is the actual worth of a product versus competing options. Value in the Customer context is not just the benefits, but what you pay versus competitive offers.
  6. Values and Value are the same: Values are what someone stands for: ethics, morals, sustainability. Value is defined above. In fact, Values create Value.
  7. Customer Value is newer than Customer Experience: Both are old concepts. However, the formal usage is more recent. Customer Value as a discipline started in the 1980s with Ray Kordupleski and AT&T, and CX in the 2000’s. Customer experience, Customer emotions, Brand Value are all measured by Customer Value.
  8. NPS is a great measure of what the Customer perceives: NPS only answers a couple of questions on repurchase and recommendation. It does not portray what Customer thinks of the product and whether he has had a good or poor experience. NPS is better used with other Customer metrics

Why are these misconceptions propagated and misunderstood? My take is that most people tend to follow what they are told, rather than delving deeply into the actual meaning of, and truly understand how these concepts should be used. These concepts are used and understood loosely.

My suggestion to the lay reader is to truly understand what each of these terms means, how they are used, and how they should be used. Reflection from one’s own experience will show what I am saying makes sense. (Remember your favorite restaurant or airline, and if you are dissatisfied, will you stop using them?)

One reason why companies and executives are not truly becoming Customer–centric is that such loosely used and understood terms confuse companies, and do not give the Customer true insight into what will really help. Thus just measuring NPS and stating that it tells the company what to do is misleading, and will prevent the Customer from truly improving.

Executives and Consultants can lead this change in understanding.

Would love your comments and help. We are happy to help others in education and executive education on courses in Value Creation.


Gautam Mahajan,
President, Customer Value Foundation and Inter-Link India

Founder editor, Journal of Creating Value
K-185 Sarai Jullena, New Delhi 110025
+91 98100 60368, 011-26831226

Twitter @ValueCreationJ

Customer Value Foundation (CVF) helps companies to Create Value and profit by Creating Value for the Customers, employee and for each person working with the companies.

Total Customer Value Management (Total CVM) transforms the entire company to focus on Creating Value for the Customer by aligning each person’s role in Creating Customer Value and getting shareholder wealth and Value.

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